The UCL Practitioner

Welcome to the blogosphere: California Attorney's Fees

Attorneys Marc D. Alexander and William M. (Mike) Hensley of Adorno Yoss Alvarado & Smith in Santa Ana have created a new blog, California Attorney's Fees. From the mission statement:

Our mission is simple: provide a resource tool to practitioners, jurists, and the public about the law governing attorneys’ fees/costs awards, but focused on the law and pragmatic experiences in California state or California federal judicial forums. Aside from examining applicable statutory and decisional law in the area, we will also explore ethical considerations that apply in requesting an award of fees and costs.

Welcome to the blogosphere, Marc and Mike!

San Francisco City Attorney files antitrust and UCL action against prescription drug wholesaler

From a press release issued by San Francisco City Attorney Dennis Herrera on May 20, 2008:

City Attorney Dennis Herrera and the San Francisco Health Plan, the City-sponsored program that provides health insurance to more than 50,000 low-income San Franciscans, today filed suit against McKesson Corporation for illegally conspiring to manipulate pharmaceutical drug prices beginning as far back as 2001. The 88-page complaint filed in U.S. District Court in Boston this morning alleges an elaborate scheme to increase the markup on more than four hundred brand-name prescription drugs in violation of federal and state laws, forcing consumers and health coverage plans “to make hundreds of millions of dollars of excess payments.”

A copy of the complaint is available at this link. The plaintiffs are the San Francisco Health Plan, "individually and on behalf of the State of California and on behalf of a class of political subdivisions of the State of California," and the People of the State of California, "acting by and through San Francisco City Attorney Dennis Herrera."

The UCL claim appears on pp. 80-82 and is pleaded in a relatively plain-vanilla way. The meat of the allegations appears in the earlier sections of the complaint. The prayer, however, seeks $2,500 per violation in statutory penalties, which the UCL authorizes in public prosecutor actions. See Bus. & Prof. Code § 17206(a). The plaintiffs are represented by a well-known plaintiffs' class action firm, Hagens Berman Sobol Shapiro LLP, in addition to the city attorney's office. [Via SFBG Politics Blog]

Incidentially, last summer, S.B. 376 was signed into law. The bill amended Business and Professions Code sections 17204 and 17206(a) to ensure that the City and County of San Francisco could still pursue UCL claims even if its population dropped below 750,000 (which it did, slightly, according to the latest federal census). The Assembly Floor Analysis explains:

According to the author, [Senator Carole Migden,] the consolidated City and County of San Francisco has a population that hovers around 750,000. As a result, it continually has to prove standing whenever it seeks to bring an unfair competition action. This bill would appear to avoid this potential confusion by reconfirming standing to the City and County of San Francisco regardless of minor fluctuations in its population.

The Senate Committee Analysis further explained:

A federal census has recently put San Francisco's population at under 750,000. This has prompted defendants in unfair competition actions to argue, albeit unsuccessfully, that San Francisco no longer has standing to bring these actions. The San Francisco City Attorney's office is concerned that it will continuously need to defend attacks on its standing, which will consume scarce public resources unless the issue is clarified in the statute.

This bill would remove the population requirement pertaining to a city and county, and instead authorize the city attorney of any city and county to bring an action for unfair competition and recover a civil penalty from the defendant in those actions.

Here is Senator Migden's press release on the bill's passage last June. The amendments went into effect on January 1, 2008.

Reminder: BASF Appellate Practice Section meeting today at noon

As a reminder, all are welcome to attend today's meeting of the BASF Appellate Practice Section. I will be speaking very informally about law blogs generally and appellate law blogs in particular. I will be joined by Alameda County Superior Court research attorney Philip Obbard, who will provide a judicial perspective on law blogs. The meeting will take place at noon at the BASF Offices, 301 Battery Street, 3rd Floor, San Francisco.

UCL/CLRA preemption case on remand: Farm Raised Salmon Cases (unpublished)

In February, in Farm Raised Salmon Cases, 42 Cal.4th 1077 (2008), the Supreme Court held that the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §§ 301 et seq.) did not preempt plaintiffs' UCL and CLRA claims. Those claims rested on the argument that the defendants improperly failed to disclose that they used artificial coloring to turn the flesh of their salmon pink before selling it. (For more on that decision, see these two blog posts.)

On remand, the Court of Appeal (Second Appellate District, Division Three) held in an unpublished opinion that the primary jurisdiction doctrine did not apply and that the trial court improperly sustained defendants' demurrer without leave to amend. Farm Raised Salmon Cases, No. B182901a (May 16, 2008). Respecting the primary jurisdiction doctrine, the court explained:

The primary jurisdiction doctrine does not apply ... if the issues involved are of a type ordinarily resolved by the courts in the first instance, an administrative agency has no particular expertise with regard to the issues, and the issues do not require the application of complex regulations. (Cundiff v. GTE California Inc., supra, 101 Cal.App.4th at p. 1413.) In those circumstances, concerns about the uniform application of regulatory laws ordinarily are not implicated.

We conclude that the sustaining of the demurrer based on the primary jurisdiction doctrine was an abuse of discretion. ....

The alleged violations of the [Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.)] and parallel provisions of the Sherman Law [(Health & Saf. Code, § 109875 et seq.)] concern “false and misleading” labeling of salmon offered for sale and the failure to state on the labeling that the salmon contains artificial coloring. Federal and state regulations expressly and unequivocally require the disclosure of canthaxanthin and astaxanthin as artificial coloring agents. (21 C.F.R. §§ 73.35(d)(3), 73.75(d)(4); Health & Saf. Code, § 110100, subd. (a).) There are no complex regulations at issue in this regard, but only straightforward requirements. The determination whether the salmon offered for sale by defendants contained those chemicals and whether the labeling failed to disclose that fact requires neither the application of complex regulations nor any particular administrative expertise. Rather, those questions are the sorts of factual questions that ordinarily are committed to the courts. Moreover, the FDCA and the regulations under that act provide no administrative procedure (and certainly no “ ‘pervasive and self contained system of administrative procedure’ [citation] to deal with the precise questions involved” as in Farmers, supra, 2 Cal.4th at page 396) to determine whether a food is misbranded, but only provide for the FDA to enforce the act by filing an action in court. (21 U.S.C. § 337(a).) Although the Sherman Law provides for an administrative proceeding to determine whether a food is misbranded (Health & Saf. Code, § 111855), we conclude that any advantage that the DHS may have in resolving the issues presented here is not particularly strong. For these reasons, we conclude that the primary jurisdiction doctrine does not apply.

Slip op. at 8-10. The Court went on to hold that the complaint adequately alleged a CLRA violation:

The CLRA prohibits, among other things, “Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have.” (Civ. Code, § 1770, subd. (a)(5).) Liberally construing this provision as the Legislature intended (id., § 1760), we conclude that by allegedly displaying and offering for sale farm-raised salmon that was artificially colored to resemble wild salmon, without disclosing the artificial coloring, defendants were “representing” that the salmon had the same origin and characteristics as wild salmon. We therefore conclude that the complaint alleges “representing” within the meaning of Civil Code section 1770, subdivision (a)(5) and that the sustaining of the demurrer to the count for violation of the CLRA was error. (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 834 [stating, “the CLRA proscribes a concealment of characteristics or quality ‘contrary to that represented’ ”].) In light of our conclusion, we need not decide whether the complaint adequately alleges other prohibited acts or practices under the CLRA.

Id. at 11. Many thanks to the blog reader who emailed with news of this opinion.

U.S. Supreme Court denies cert. in class action ban case: T-Mobile USA, Inc. v. Laster

Today, the U.S. Supreme Court denied a petition for a writ of certiorari in T-Mobile USA, Inc. v. Laster, 07-976 (order list dated 05/27/08). The petition sought review of an unpublished Ninth Circuit decision in which that court rejected the defendant's argument that the Federal Arbitration Act preempted state law governing unconscionability of class action bans embedded in arbitration clauses. Earlier in the year, the Supreme Court also declined to take up that same issue in Circuit City Stores, Inc. v. Gentry, decided by the California Supreme Court. Links to the briefing in the T-Mobile case are available via SCOTUSBlog.

[Via The Complex Litigator; Consumer Law & Policy Blog]

"Keeping Up with Class Actions: Reports, Legal Sites and Blogs of Note"

LLRX.com has an article called "Keeping Up with Class Actions: Reports, Legal Sites and Blogs of Note" (May 19, 2008). The article is by Scott Russell, a Reference Librarian with Shook Hardy & Bacon LLP in Kansas City, Missouri. Thanks, Scott!

[Via ClassActionBlawg.com]

Informal talk on law blogs at next week's BASF Appellate Practice Section meeting

At next week's meeting of the Bar Association of San Francisco, Appellate Practice Section, I will be speaking informally on law blogs generally and appellate law blogs in particular. I'm happy to be able to announce that Mr. Philip Obbard, longtime research attorney for the Alameda County Superior Court complex litigation department, is scheduled to join me and provide a judicial perspective on law blogs.

The meeting will take place next Thursday, May 29, 2008 at noon at the BASF Offices, 301 Battery Street, 3rd Floor. (Note that you must show a picture ID to gain entry to 301 Battery.) This will be a very informal talk so no MCLE credit will be provided, but all are welcome to attend!

[Cross-posted at The Appellate Practitioner.]

State Bar's annual UCL conference: Judge Kramer's remarks

A belated thanks to everyone who attended the State Bar's annual UCL conference last week! I thought it was a great conference and I enjoyed meeting so many of the attendees.

San Francisco Superior Court Judge Richard A. Kramer was the keynote luncheon speaker, and his remarks were some of the most interesting of the day. Judge Kramer has graciously given me permission to share my notes of his comments by posting them here. He spoke on three topics: (1) how to organize UCL cases; (2) discovery of putative class member information; and (3) e-discovery.

UPDATE: This post has been updated to correct a couple of errors pointed out by Judge Kramer. My apologies.

How easy UCL cases are and how to organize them

Step 1: Pin down the business practice being challenged.

• Usually the attorneys can do this themselves; sometimes it appears in the complaint; sometimes they need help. Try to get a stipulation on this point.

Step 2: "So what?"

• Is it unlawful, deceptive or unfair? Or is it what makes America great? Get the plaintiff to say what's the problem here. What's wrong with it?

Step 3: How many people are they doing it to?

• Who is it that allegedly got hurt by this? Is it a class action?

• Do we have the right people before the court to complain about this? (Standing)

The parties can agree on whether #3 or #2, above, comes first. For example, will the standing question really be determinative, or is it just a step along the way because new plaintiffs will come in? Will defendants waive the res judicata/collateral estoppel problem or will class issues have to be decided first?

Step 4: What do you want me to do about it? In other words, what are the remedies? I like to do this one last.

• The toughest discovery questions come up here. Why did you do this? Are you going to keep doing it? Do you really need the court to tell you to stop it? How much did you get by doing it?

• Many discovery disputes can be avoided by putting this last. There are very few discovery disputes on what the practice is (step 1). There are none on "so what?" (step 2). Some issues come up on standing and class certification (step 3). Everyone switches their positions on burden when you get to the last stage.

• Often parties work it out by the time you get to step #4.

Conclusion: Have a structure. Have things proceed in a logical sequence. Do your discovery in a logical sequence.

Discovery of putative class member information

There is no law on this no definitive law on this yet other than it is within the court's sound discretion. All of the cases are mis-cited to me. All of the cases are "abuse of discretion" cases. Pioneer Electronics is mis-cited every time. It relates to general evidence (not class evidence) and approved the application of an abuse of discretion standard of review. Best Buy involved a goofy procedure.

Very few cases recognize the distinction between discovery to investigate the merits vs. discovery to find a new plaintiff. The standards for these two things will be different.

The developing rule is as follows: If the plaintiff never had standing, he/she can't get discovery. If plaintiff lost standing, then (maybe) the plaintiff can get discovery. No case has established an absolute right.

Best Buy may have been wrongly decided. The trend in the cases seems to distinguish between disqualified plaintiffs who never had standing from those who had standing at the time of filing the lawsuit but then lost it due to some extrinsic happening (e.g. Prop. 64). Under that dichotomy, since Best Buy's plaintiff (the lawyer in the case) never had standing, maybe the result would be different.

This issue may stay within the realm of judicial discretion. More guidance is anticipated. I see attorneys' arguments on this point getting better and more nuanced.

E-Discovery

Qualcomm [phonetic] is not an e-discovery case, period. Attorneys knew about documents and withheld them from the court. The outcome would be exactly the same if the documents were stone tablets.

The differences between e-discovery and the days when documents were stored in a warehouse in Stockton are not that significant:

1. Indexing systems are better now.
2. "Any and all" doesn't exist anymore because there's too much stuff.
3. Judges are better suited to think about what you need, not what exists.

Other than that, everything's the same. The court is to balance the burdens against reasonable needs and come up with a solution.

I never believe people who say "that's impossible." Two reasons: (1) You're not an IT expert. (2) You've been told this through a chain of people who don't know.

The solution: "Bring your geek to court." I have "Bring Your Geek to Court Day." "Your Geek" is not the head of the IT department. He's the guy you go to when something isn't working and he fixes it for you.

You ask that person how do we get this done? And they come up with ideas. Do it incrementally. See what this gets us, and then do the next step.

The only thing better than "Bring Your Geek to Court Day" is "Both sides bring your geeks to court" and go in the back and figure it out. They come out with a really good start.

Judge Kramer had to run back to court after that because he was in trial, but he left us with a huge amount of useful information, and my notes do nothing to capture his delivery. I look forward to hearing him speak at future conferences.

Craigslist sues eBay for UCL violations

On May 14, 2008, the Recorder reported on a new UCL competitor action filed by Craigslist against eBay. Zusha Elinson, "Craigslist Fires Back at eBay," The Recorder (May 14, 2008) (subscription). The complaint, filed in San Francisco Superior Court on May 13, 2008, is very detailed and quite interesting. It separately alleges violations of the "unlawful" and "unfair" prongs, and asserts violations of certain common-law rules (as well as various statutes) as the basis for the "unlawful" prong claim. Complaint at pp. 15-19. It correctly alleges the post-Cel-Tech formulation of the "unfair" prong (which governs competitor actions). Id. at 16-17.

On May 19, 2008, the Daily Journal reported that "Craigslist and eBay Vie for Edge in Venue" (subscription). The Daily Journal article reports that by the time Craiglist filed suit in San Francisco Superior Court (on May 13), eBay had already sued Craigslist in Delaware Chancery Court (on April 30). "'It's a corporate blood war,' said Fred Lambert, a professor at UC Hastings College of the Law who is an expert on corporations and securities law."

Petition for review filed in County of Santa Clara v. Superior Court (Atlantic Richfield Co.)

Yesterday, a petition for review was filed in County of Santa Clara v. Superior Court (Atlantic Richfield Co.), no. S163681. Many thanks to the blog reader who notified me of this and forwarded copies of the petition for review and the accompanying motion for judicial notice.

In County of Santa Clara v. Superior Court (Atlantic Richfield Co.), 161 Cal.App.4th 1140 (2008), the Court of Appeal (Sixth Appellate District) held that public entities may hire outside counsel to represent them on a contingency-fee basis in "ordinary civil cases," so long as the contingency-fee agreements do not purport to delegate the public entities' discretionary decision-making power to private attorneys with a financial stake. For a more detailed discussion of the Santa Clara decision, see this blog post.

"Class Action Seminar: Secrets from the Bench and Bar"

On Wednesday, May 21, 2008, Consumer Attorneys of California (Class Action Section) and the Consumer Attorneys Association of Los Angeles will jointly present an MCLE program called "Class Action Seminar: Secrets from the Bench and Bar." The program runs from 1:00 to 4:15 p.m. at CAALA's office (800 W. 6th Street, Suite 700, Los Angeles), and will be followed by a "meet the judges" reception. It sounds like an excellent program, and if I were in Southern California I would definitely plan to attend.

Off-topic post: Supreme Court to decide In re Marriage Cases today

This is way off topic, but the Supreme Court will be handing down its eagerly-anticipated decision in In re Marriage Cases, no. S147999, today at 10:00 a.m. Some of the briefs from the case are collected at this link. When the opinion is posted, it should be available here: In re Marriage Cases, ___ Cal.4th ___ (May 15, 2008). This is the issue on review:

Does California's statutory ban on marriage between two persons of the same sex violate the California Constitution by denying equal protection of the laws on the basis of sexual orientation or sex, by infringing on the fundamental right to marry, or by denying the right to privacy and freedom of expression?

UPDATE: The Supreme Court, by a vote of 4-3, has answered that question in the affirmative:

Accordingly, in light of the conclusions we reach concerning the constitutional questions brought to us for resolution, we determine that the language of [Family Code] section 300 limiting the designation of marriage to a union “between a man and a woman” is unconstitutional and must be stricken from the statute, and that the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples.

Slip op. at 120.

New class certification decision: Bufil v. Dollar Financial Group, Inc.

In Bufil v. Dollar Financial Group, Inc., ___ Cal.App.4th ___ (Apr. 17, 2008; pub. ord. May 13, 2008), the Court of Appeal (First Appellate District, Division Four) reversed an order denying class certification of certain wage and hour claims. Notably, the Court distinguished Alvarez v. May Department Stores Co., 143 Cal.App.4th 1223 (2006), the collateral estoppel case.

"2007 Developments in California Class Action Law"

The Spring/Summer 2008 issue of Competition, the journal of the Antitrust and Unfair Competition Law Section of the State Bar of California, arrived in the mail last week. It includes several articles on antitrust law and one of interest to class action practitioners, "2007 Developments in California Class Action Law" by Pamela M. Parker of Coughlin Stoia Geller Rudman & Robbins LLP. The article is very comprehensive and discusses a number of recent class action cases of interest, including Capitol People First v. State Department of Developmental Services, 155 Cal.App.4th 676 (2007) and Lewis v. Robinson Ford Sales, Inc., 156 Cal.App.4th 359 (2007).

Articles from the Spring/Summer 2008 issue of Competition are not yet available online.

"SF Weekly penalty could rise to $15.6 million"

In today's San Francisco Chronicle, Bob Egelko reports that "SF Weekly penalty could rise to $15.6 million":

Judge Marla Miller of San Francisco Superior Court said she believes she's required under state law to increase the damages and issue an injunction in light of the jury's March 5 verdict that the SF Weekly, part of a national chain of alternative newspapers, cut its advertising rates below its costs to undermine the locally owned Guardian.

The jury awarded $6.3 million to the Guardian for its losses. Miller, in what she described as a tentative decision, said Friday she would triple the portion of those damages that equals one year of losses, bringing the total to $15.6 million, and prohibit the Weekly from selling below-cost ads in order to hurt the Guardian.

My prior post on this interesting Unfair Practices Act (and UCL) case is here. Business & Professions Code section 17082 requires trebling of any damages award in a UPA case ("any plaintiff in any such action shall be entitled to recover three times the amount of the actual damages, if any, sustained by the plaintiff"). It is unclear why the trebling would be limited to "one year of losses," however.

UPDATE: On May 20, 2008, the Daily Journal reported that "Judge Increases Jury Award for S.F. Newspaper" (subscription). According to the article, Judge Miller trebled the damages to $15.6 million and "issued a 10-year injunction forbidding SF Weekly, the Guardian's competitor and the defendant in the unfair competition case, from selling display advertisements below cost."

Interesting UCL restitution order: Ybarra v. Aramark Corp.

On May 1, 2008, Judge David C. Velasquez, Supervising Judge of the Orange County Superior Court Complex Civil Panel, issued an interesting order in a wage and hour case, Ybarra v. Aramark Corp., No. 30-2008-0018008-CU-OE-CXC (Orange Cty. Super.). Judge Velasquez held that waiting time penalties under Labor Code section 203 were recoverable under the UCL as "restitution":

In similar fashion to the "additional hour of pay" [in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1108], the instant court observes that Labor Code §203 does not provide that the employer is "subject to" the imposition of the waiting time penalty. Rather that section states "the wages of the employee shall continue" if the employer does not pay separation wages within 72 hours of the employee's termination. The employee is not required to do anything affirmative — "take action" — in order to be entitled to the continuing right to wages. The right to the waiting time penalty is self-executing, i.e., the employee's right to payment of the waiting time penalty arises immediately upon the satisfaction of the condition precedent, late payment of the last wages due to the employee at the time of termination from employment. In that respect, because the waiting time penalty becomes immediately due and payable to the employee, the right to receive the penalty becomes a vested property right of the employee and the proper subject of restitution. (Cf. Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 178 [wages which are due but unpaid are the proper subject of restitution].)

Minute Order at 2. This would be a form of what I call "vested interest" restitution. Judge Velasquez therefore denied the motion to strike the complaint's references to UCL restitution and to the four-year statute of limitations (and overruled the defendant's demurrer to the UCL cause of action as a whole).

Many thanks to the blog reader who emailed this order to me. If you know of an interesting trial-level order like this one, I'd be glad to receive a copy of it ([email protected]).

Ninth Circuit memdispo partially reverses denial of class certification: Sepulveda v. Wal-Mart Stores, Inc.

In an unpublished memorandum disposition, Sepulveda v. Wal-Mart Stores, Inc., 2008 WL 1868333 (Apr. 25, 2008), the Ninth Circuit partially reversed an order denying class certification, holding that the district court correctly denied certification under Rule 23(b)(3), but applied the wrong standard in denying certification under Rule 23(b)(2). The underlying suit alleges misclassification of certain Wal-Mart assistant managers as exempt from California overtime laws, and it includes a UCL claim. See Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D. Cal. 2006).

The Ninth Circuit remanded for the district court to reconsider class certification under Rule 23(b)(2). The memdispo reads, in its entirety:

Plaintiffs, current and former Assistant Managers of Defendant, Wal-Mart Stores, Inc., appeal the district court’s order denying their motion for class certification. We have jurisdiction under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f).

The district court misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied class certification under Federal Rule of Civil Procedure 23(b)(2). See Molski v. Gleich, 318 F.3d 937, 949–50 (9th Cir. 2003) (refusing to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998)). The district court must focus on the intent of the Plaintiffs in bringing suit. Id. at 950. We therefore hold that the district court abused its discretion in denying class certification. See Sw. Voter Registration Educ. Project v. Shelley, 344 F.3d 914, 918 (9th Cir. 2003) (en banc) (per curiam).

On remand the district court shall reconsider class certification under Federal Rule of Civil Procedure 23(b)(2), and, in the alternative, also reconsider using Rule 23(c)(4) to certify specific issues under the Rule 23(b)(2) standard. See Society for Individual Rights, Inc. v. Hampton, 528 F.2d 905, 906 (9th Cir. 1975). In reconsidering these issues, the district court may find the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal. 4th 443, 457–59, 462, 464–65 (2007), instructive.

The district court did not abuse its discretion in denying class certification under Federal Rule of Civil Procedure 23(b)(3), and we therefore affirm that portion of its order. Each party shall bear its own costs on appeal.

REVERSED in part; AFFIRMED in part.

The Ninth Circuit cited some of the most pro-class-action parts of Gentry. For example, in the middle of page 462 of Gentry, the Supreme Court wrote:

We also agree with the Bell court that “class actions may be needed to assure the effective enforcement of statutory policies even though some claims are large enough to provide an incentive for individual action. While employees may succeed under favorable circumstances in recovering unpaid overtime through a lawsuit or a wage claim filed with the Labor Commissioner, a class action may still be justified if these alternatives offer no more than the prospect of ‘random and fragmentary enforcement’ of the employer's legal obligation to pay overtime.” (Bell, supra, 115 Cal.App.4th at p. 745, quoting Vasquez, supra, 4 Cal.3d at p. 807.) “By preventing ‘a failure of justice in our judicial system’ (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 434), the class action not only benefits the individual litigant but serves the public interest in the enforcement of legal rights and statutory sanctions.” (Bell, supra, at p. 741.) In other words, absent effective enforcement, the employer's cost of paying occasional judgments and fines may be significantly outweighed by the cost savings of not paying overtime.

Gentry, 42 Cal.4th at 462. And here is what the Supreme Court said at pages 464-65:

It is true that an employee may seek administrative relief from overtime violations with the Labor Commissioner through a “Berman” hearing procedure pursuant to [Labor Code] sections 98 to 98.8. (Added by Stats.1976, ch. 1190, §§ 4-11, pp. 5368-5371.) But a losing employer has a right to a trial de novo in superior court, where the ruling of the Labor Commissioner's hearing officer is entitled to no deference. (§ 98.2, subds. (b), (c); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1116 (Murphy).) Thus, Berman hearings may result in no cost savings to the employee. Moreover, in Bell, in rejecting the same argument, the court considered a declaration by a former chief counsel of the DLSE, who stated that “ ‘[r]equiring two thousand or so class members to go through individual “Berman” hearings would obviously be extremely inefficient as compared to a single class action. Also, a deluge of claims would simply outstrip the resources of the DLSE ... impacting not only these claimants but others unrelated to this suit.’ ” [*465] (Bell, supra, 115 Cal.App.4th at p. 746, 9 Cal.Rptr.3d 544.) In short, Berman hearings are neither effective nor practical substitutes for class action or arbitration.

Id. at 464-65. I think we know where the Ninth Circuit wants the district court to go on remand.

[Via ClassActionBlawg.com; Class Action Defense Blog]

New Second Circuit decision: Ross v. Bank of America, N.A.

Ross v. Bank of America, N.A., ___ F.3d ___ (2d Cir. Apr. 25, 2008), is technically an antitrust case, but the Second Circuit's opinion is noteworthy for its discussion of arbitration clauses that ban class actions. The plaintiffs alleged that, beginning in late 1998 or early 1999, a group of banks met and agreed to include mandatory arbitration clauses with class action bans in all of their credit card agreements. Slip op. at 4-5. The plaintiffs claimed that the conspiracy violated federal antitrust laws, specifically, Section 1 of the Sherman Act (15 U.S.C. § 1). Id. at 5-6. The district court granted the defendant's motion to dismiss, holding that the plaintiffs lacked Article III standing because no defendant had threatened to enforce a collusively-formed arbitration provision against them. Id. at 6-7. The Second Circuit disagreed, and reversed:

The cardholders have adequately alleged antitrust injuries in fact. The Complaint asserts that, as a result of an illegal conspiracy and group boycott, the cardholders have been subjected to suppressed competition and “deprived of any meaningful choice on a critical term and condition of their general purpose card accounts.” Further, the district court recognized that “reduced choice and diminished quality of credit card services” were among the injuries asserted by the cardholders. In re Currency Conversion, 2006 U.S. Dist. LEXIS 66986, at *9. The Supreme Court has opined that one form of antitrust injury is “[c]oercive activity that prevents its victims from making free choices between market alternatives.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 528 (1983); see also Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S.Ct. 2705, 2736 (2007) (Breyer, J., dissenting) (identifying “providing consumers with a free choice” about whether to choose lower prices or more services as “a basic antitrust objective”); FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 459 (1986) (“A refusal to compete with respect to the package of services offered to customers, no less than a refusal to compete with respect to the price term of an agreement, impairs the ability of the market to advance social welfare by ensuring the provision of desired goods and services to consumers at a price approximating the marginal cost of providing them.”). The Complaint alleges that reduced choice and diminished quality in credit services result directly from the banks’ illegal collusion to constrict the options available to cardholders. These harms are sufficiently “actual or imminent,” as well as “distinct and palpable,” to constitute Article III injury in fact. Denney [v. Deutsche Bank AG], 443 F.3d [253,] 264 [(2d Cir. 2006)].

The harms claimed by the cardholders, which lie at the heart of their Complaint, are injuries to the market from the banks’ alleged collusion to impose a mandatory term in cardholder agreements, not injuries to any individual cardholder from the possible invocation of an arbitration clause. The antitrust harms set forth in the Complaint – for example, the reduction in choice for consumers, many of whom might well prefer a credit card that allowed for more methods of dispute resolution – constitute present market effects that stem directly from the alleged collusion and are distinct from the issue of whether any cardholder’s mandatory arbitration clause is ever invoked. The reduction in choice and diminished quality of credit services to which the cardholders claim they have been subjected are present anti-competitive effects that constitute Article III injury in fact.

Id. at 8-9, 10. Interestingly, the Second Circuit accepted the argument that the cards were less valuable to consumers because (among other things) the class action bans meant that the class action bar would not be motivated to police the banks' conduct:

According to the cardholders, the conspiracy among the banks was designed to limit the choice of terms offered to cardholders, resulting in at least two ways in their receiving objectively less valuable cards than would otherwise have been the case. First, because the banks conspired not to offer cards permitting class actions, the cardholders will be forced to expend time and legal fees to monitor the legality of the banks’ behavior, whereas if the cardholders had access to a card that permitted class actions, they would have the option of relying on motivated class action attorneys to perform this function. If the cardholders chose not to monitor the banks – which would perhaps be more likely because, as the Complaint observes, actions that result in significant aggregate revenue to the banks (concerning, e.g., late fees, overlimit fees, foreign transaction fees, APR, etc.) generally harm individual consumers in only small amounts – they would still lose the services of class action attorneys. Either way, the cardholders would have been forced to accept a less valuable card as a result of the banks’ alleged collusion.

Second, the alleged conspiracy to limit the cardholders to cards that require arbitration of disputes also diminished the present value of the cards offered to the cardholders. A card that limits the holder to arbitration is less valuable (all other factors being equal) than a card that offers the holder a choice between court action or arbitration. Even assuming that the cardholders might be able to void that limitation when an actual dispute arises by opposing the banks’ motion to compel arbitration via a claim of antitrust collusion, that possibility is more theoretical than real for two reasons. The cost of litigating the antitrust issue when the particular dispute arises will almost certainly be disproportionate to the dispute. (A plaintiff will not spend a hundred thousand dollars in legal fees to litigate a five thousand dollar dispute.) Furthermore, the cardholders’ ability to prove the illegal collusion may well have evaporated with the passage of time, due to the deaths, retirements, changes of jobs, and fading memories of the participants and observers of the conspiratorial meetings, as well as the loss and destruction of documents.

We believe that at least in these two independent respects the cardholders have alleged an illegal conspiracy that resulted in a present injury by requiring them to accept less valuable cards than would otherwise have been available, but for the illegal collusion.

Id. at 10-12 (emphasis added). [Via Blawgletter]

"The Search for Intelligent Life in the Blogosphere"

The May 2008 issue of California Lawyer has a cover story called "The Search for Intelligent Life in the Blogosphere: A survival guide to legal blogs and blogging." The article mentions a number of California law blogs, including May it Please the Court by J. Craig Williams, Bag and Baggage by Denise Howell, and the California Biotech Law Blog by Kristie Prinz. It also discusses the history of law blogs, the benefits of blogging for lawyers (and readers), and offers "7 Tips for Successful Blogging."

I owe a particular debt of gratitude to Craig for mentioning my blog to the reporter who wrote the article:

For instance, if Williams needs an update on developments in California's Unfair Competition Law (Bus. & Prof. Code §§ 17200-17209), he goes straight to The UCL Practitioner (www.uclpractitioner.com). "I look there if I need to know the latest in the law," Williams says of the blog written by Kimberly A. Kralowec, a partner at Schubert & Reed in San Francisco. "I can count on Kimberly for that."

Craig has a new book coming out next month, How to Get Sued: An Instructional Guide, which I am looking forward to reading and hope to be able to review here.

Blog hiatus

The blog will be on a short hiatus, resuming next week. Please continue to email me at [email protected].